Bar of limitation for imposing penalties - Section 275 - Income Tax - Ready Reckoner - Income Tax

Bar of limitation for imposing penalties - Section 275 W.e.f. 01.04.2025 [ Substituted vide Section 88 of the Finance Act, 2025 ] Time Limit for the passing Penalty Order [ Section 275(1) ] No order imposing a penalty under this Chapter shall be passed after the expiry of six months from the end of the quarter in which, (a) the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, if the relevant assessment or other order is not the subject matter of an appeal under section 246 or section 246A or section 253; (b) the order of revision under section 263 or section 264 is passed, if the relevant assessment or other order is the subject matter of revision under the said sections; (c) the order of appeal under section 246 or section 246A is received by the jurisdictional Principal Commissioner or Commissioner, if the relevant assessment or other order is the subject matter of an appeal under the said sections and no further appeal has been filed under section 253; (d) the order of appeal under section 253 is received by the jurisdictional Principal Commissioner or Commissioner, if the relevant assessment or other order is the subject matter of an appeal under the said section; (e) notice for imposition of penalty is issued, in any other case. Revision of Penalty Orders [ Section 275(2) ] The order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be revised on the basis of assessment as revised by giving effect to the order passed under section 246 or section 246A or section 253 or section 260A or section 261 or revision under section 263 or section 264, where the relevant assessment or other order is the subject matter of an appeal or a revision under the said sections. Limitations on Passing Penalty Orders [ Section 275(3) ] No order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty under section 275(2) shall be passed (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; (b) after the expiry of six months from the end of the quarter in which the order passed under section 246 or section 246A or section 253 or section 260A or section 261 is received by the jurisdictional Principal Commissioner or Commissioner, or the order of revision under section 263 or section 264 is passed. Procedural Safeguards [ Section 275(4) ] The provisions of section 274(2) shall apply to the order imposing or enhancing or reducing penalty under section 275(2). Computing the period of limitation [ Section 275(5) ] In computing the period of limitation for the purposes of this section, the following period shall be excluded: (a) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129; (b) the period commencing on the date on which stay on proceeding for levy of penalty was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by the jurisdictional Principal Commissioner or Commissioner. . Upto 31.03.2025 1. Where penalty is to levied for under reporting or misreporting of income u/s 270A Where penalty is to be levied by the AO in an assessment made by him. Situation (i)(a) Where an appeal filed against the assessment order to the Joint Commissioner (Appeals) or to the Commissioner (Appeals) [Amendment by FA, 2023] [Section 275(1)(a) and its proviso] Time limit for passing penalty order Penalty order can be passed by AO On or before the expiry of the financial year in which the assessment proceedings are completed, or On or before the expiry one year from the end of the financial year in which the order of the Joint Commissioner (Appeals) or to the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or [Omitted w.e.f. 01.10.2024] Principal Commissioner or Commissioner, whichever period expires later Situation (i)(b) In a case, where further appeal has been filed to appellate tribunal [Section 275(1)(a)] Time limit for passing penalty order Penalty order can be passed by AO On or before the expiry of the financial year in which the assessment proceedings are completed, or On or before the expiry of six months from the end of the month in which order of Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or [Omitted w.e.f. 01.10.2024] Principal Commissioner or Commissioner of IT. whichever period expires later Situation (ii) Where revision application is filed against such asseement to PCIT or CIT u/s 264 Time limit for passing penalty order 6 months from the end of the month in which order is passed by PCIT or CIT u/s 264 Situation (iii) Where no appeal has been filed against the assessment order or no application is made for revision u/s 264 Time limit for passing penalty order Penalty order can be passed by AO On or before the expiry of the financial year in which the assessment proceedings are completed, or On or before the expiry of 6 months from the end of the month in which action for imposition of penalty is initiated. whichever is later Where the penalty is to levied by the Joint Commissioner (Appeals) or to the Commissioner (Appeals) in an order passed by him u/s 250 Situation (i) Where an appeal has been filed to ITAT against such order Time limit for passing penalty order Penalty order can be passed by JCIT(A) or CIT(A) On or before the expiry of the financial year in which order u/s 250 is passed, or On or before the expiry of 6 months from the end of the month in which order of ITAT is received by PCIT or CIT. whichever is later Situation (ii) Where no appeal has been filed against such order to ITAT Time limit for passing penalty order Penalty order can be passed by JCIT(A) or CIT(A) On or before the expiry of the financial year in which order u/s 250 is passed, or On or before the expiry of 6 months from the end of the month in which penalty proceedings were initiated by Commissioner (Appeals). whichever is later Where the relevant assessment order is subject matter of revision u/s 263. Situation (i) Where an appeal against order u/s 263 is filed to ITAT Time limit for passing penalty order Penalty order can be passed by PCIT or CIT On or before the expiry of the financial year in which order u/s 263 was passed by PCIT/CIT, or On or before the expiry of 6 months from the end of the month in which order of ITAT is received by PCIT or CIT. whichever is later Situation (ii) Where no appeal is filed against order u/s 263. Time limit for passing penalty order Penalty order can be passed by the PCIT or CIT on or before 6 month in which order u/s 263 is passed. 2. Where penalty is to be levied for any default other than concealment of income Situation (a) Where penalty is levied during the course of assessment proceedings Time limit for passing penalty order Time limit of passing an order is same as given in Point No. 1(A)(ia), (ib), (ii) and (iii) above Situation (b) Where is levied after completion of assessment or no assessment is to be made Time limit for passing penalty order Penalty order can be passed On or before the expiry of the financial year in which order in which penalty proceedings were initiated, or Within 6 months from the end of the month in which penalty proceedings were initiated whichever is later 3. Situation Where the relevant assessment or other order is the subject-matter of an appeal to the Joint Commissioner (Appeals) or to the Commissioner (Appeals) or to the Appellate Tribunal, to the High Court or to the Supreme Court or revision under section 263 or section 264 but the penalty order has been passed before the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Principal Chief Commissioner or Chief Commissioner or [ Omitted w.e.f. 01.10.2024 ] /PCIT/ or before the order of revision under section 263 or section 264 is passed by the PCIT/CIT [Section 275(1A)] Time limit for passing penalty order an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the Joint Commissioner (Appeals) or Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263 or section 264. However, no order of imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed- - (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; - (b) after the expiry of 6 months from the end of the month in which the order of the Joint Commissioner (Appeals) or Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Principal Chief Commissioner or Chief Commissioner or [ Omitted w.e.f. 01.10.2024 ] Principal Commissioner or Commissioner or the order of revision under section 263 or section 264 is passed. Important Note 1. Provision of section 274(2) - No order imposing a penalty shall be made By the ITO where the penalty exceeds Rs.10,000. By the AC or DC where penalty exceeds Rs.20,000. Except with the prior approval of Joint commissioner. 2. Clarification is give by CBDT on, the limitation for imposition of penalty under sections 271D and 271E is determined under section 275(1)(a) or section 275(1)(c) . it is a settled position that the period of limitation of penalty proceedings under section 271D and 271E is governed by the provisions of section 275(1)(c) . [ Circular no. 10/2016 dated 26.04.2016 ] 3. Exclusion of certain period - In computing the period of limitation for the purposes of section 275 shall be excluded,- ( i ) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129; ( ii ) any period during which the immunity granted under section 245H remained in force; and ( iii ) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court.